Are the benefits of price transparency overstated?

I heard this on the radio recently: Mom takes her new baby to the emergency department on a weekend because she thinks her daughter might have a urinary tract infection. She’s right, but regulations say the baby has to stay in the hospital for two days to ensure the infection clears. Afterwards, the mom is surprised by and concerned about a $7,000 hospital bill for the baby’s care.

The reporter says that since more companies are purchasing high-deductible health plans for their employees, it’s increasingly important that people can find out the price of their care so they can make better choices.

I say, “What?”

First of all, a trip to the ED is rarely carefully planned, meaning that this mom probably didn’t go online or call around to see which ED would give her the best price.

Second, this woman didn’t know what her baby needed. How could she know what price to look for?

Third, because she wasn’t sure what the problem was or what the treatment would entail, it is unlikely she would have been able to discover those pesky hospital regulations about the conditions under which babies with UTIs are discharged from the ED.

And fourth, do you think a new mother is going to violate regulations and take her sick baby out of the hospital against medical advice because it costs too much?

The idea that knowing the price of our care will encourage us to act like wise consumers is a hugely popular topic on blogs, in editorials and in the news. But relying on access to price information to drive changes in our health care choices is full of false promises to both us and to those who think that by merely knowing the price, we will choose cheaper, better care and result in cost savings to us and to our health care institutions.

The way we actually receive health care is far from the idealized version that many “patients as health care consumers” advocates imagine — you know, the “I need a new dishwasher; I’ll look at Consumer Reports to see which model has the features and quality I want at a price I can afford” approach.

Similar information about health care is simply not available, even if we have the time and wherewithal to seek it out. While it is increasingly possible to discover the price of various tests, treatments, procedures and clinicians, they are by no means posted online for every hospital and clinic in the country. I have written elsewhere about how useless it is to know the price of a service or procedure or test without being able to consider its quality relative to that of others offering the same one. These two deficits strike blows to the promise that price transparency will make for wiser decisions that cost us — and the system — less money.

Here is a third blow: Our inability to judge the relative effectiveness of various services, procedures or treatments. We always have a choice between a test/no test or treatment/no treatment and often we have a number of choices among different approaches to prevention, diagnosis, management and treatment. What we lack is information about the relative effectiveness of our choices. What are the probabilities of benefit and the risks of harm in the long- and short-term of the alternatives? Again, this information sometimes exists but mostly it does not.

We depend on our clinicians to make recommendations based on professional evidence- and experience-informed algorithms. The vast majority of us are unable to assemble arrays of evidence on our own that allow us to compare our test and treatment options. While some decision support tools exist and can be helpful in making comparisons when/if we can locate them and adapt them to our individual circumstances, their number is dwarfed by the hundreds of choices I must make, for example, about the treatment of my lung cancer for which no comparative effectiveness data or decision support tools exist.

With only scant information about the comparative effectiveness of different treatments or tests, how can we make a rational decision about the price of one versus another?

Is the expectation that the woman in the story above will calculate the risks and benefits of a two-day hospital stay for her infant versus bringing her home that night? Or will she make that determination based on price alone? Am I supposed to figure out the effectiveness of a PET-CT versus a CT scan for the progression of my cancer given my current symptoms? Or will I not bother and decide based on the relative price? Are you ready to spring for the cheapest antibiotic for your sick child without understanding that different ones may be more or less effective and have different risks of side effects?

Yes, I know there are some situations in which it is possible for us to do this. As a result of the mammography study released last week, millions of women will now be asked to judge the relative benefits of getting a mammogram this year, given their health histories. But even assuming the information about the relative value of a test or treatment exists and is available in a form that is useful to me, finding and using it requires time, tenacity, experience and/or a clinician who will take the time to interpret that information for me given my health history and then discuss how I might weigh the relative value of my choices.

The biggest and most serious blow to idea that price transparency will lead to cost reductions, however, is that we can and will dispassionately step back in the midst of our own suffering or that of our mom or our baby or our spouse. We will stop, gather information and make a rational economic calculus about whether and which test or treatment we are willing to pay for.

I am skeptical of our willingness and ability to do this. My experience as a patient and the stories I have heard over the years from those who are seeking health care — even with constrained resources — shows a remarkable impulse to focus on the steps that will reduce the suffering: Will this test give me or my clinician information about what to do next? Will this test or procedure help me get well or feel more comfortable or will it increase the pain? What are the short- and long-term consequences of taking/not taking this action? Price is a minor consideration if it enters the calculus at all.

Should the price of our health care tests and treatments be transparent? Of course. There are times when some of us will want or need that information. Should anyone expect that simply by making this information available we will make dramatically different — and better — choices? No, because without quality and effectiveness information it is useless, and because our aim is much more expansive than getting the cheapest deal on our health care. Like the mom who took her daughter to the ED, we are each doing the best we can to use the tools of medicine in the moment so that we and those we love can live as well as we can for as long as we can.

Jessie Gruman is the founder and president, Center for Advancing Health. She is the author of Aftershock: What to Do When You or Someone you Love is Diagnosed with a Devastating Diagnosis. She blogs on the Prepared Patient blog.

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  • ninguem

    Assuming the story is true, a “new baby” will have had the deductible used up in the nursery care at birth and the ER visit for this urinary tract infection.

    So where’s the problem?

  • buzzkillerjsmith

    Neonates with UTIs can very quickly wind up septic and then dead. All of the peds and ER and family docs here know this. Hence the hospitalization.

    Of course mom didn’t get upset about a bad thing that could have happened but did not. But she was smart enough to take the kid in.

  • http://clearhealthcosts.com/ Jeanne (clearhealthcosts)

    Very thoughtful piece. Thank you for writing it!

    People who have a “shoppable” treatment or test are very different from people who are in an emergency situation, like a mom with a sick kid. We agree with you: people need to have clarity on pricing, and then they can use or not use as they see fit.

    Also, on quality: the quality metrics are as opaque in this industry as the pricing is. Of course we don’t want the cheapest MRI or the cheapest cancer care; what we want is value.

    But for something simple and shoppable and relatively comparable, like an MRI, if we know price, we can then begin to ask what makes the $6,000 MRI so much better than the $400 one. Once cost (or price, or charge, or payment) comes out of the shadows, then good quality metrics must too.

    One way we look at it: If we wait for quality metrics to become perfect before we reveal cost-charge-pricing, we’ll be here for another hundred years.

    Price + good quality metrics = value. Value is what we’re after.

    • http://onhealthtech.blogspot.com Margalit Gur-Arie

      I think what we want is quality in all cases, and value if possible.
      Value is not equal to price plus quality. Value is equal to quality divided by price. When prices are high enough (as for hospitalizations like the one described here), quality variations are not going to affect the “value” very much, hence all expensive treatments are low-value, because nowhere in this equation is the benefit to the patient accounted for (e.g. live baby vs. dead baby).

    • ninguem

      The hospital care was price-shopped.

      It’s called an insurance network.

      The insurance company “shopped price” and agreed in advance to a price for hospital services.

      These sorts of posts from the “experts” really gets tiresome. All she’s doing is pointing out the obvious. It’s been the same answer for the 20 years we have had HSA’s and MSA’s before that.

      No, you don’t shop price for your emergency heart surgery. Neither do I, and I am a physician. The insurance company has done that for you already. You shop price over routine medical services, which is still a very large part of healthcare spending.

      What really makes this tiresome is the answer always pointed to is……….Obamacare, which will solve all this.

      I thought Obama himself used the term “skin in the game”, which mother sure has right now. And the current answer……Obamacare…….will put many Americans into………high-deductible health plans.

      So if this scenario was under the older HDHP and HSA system, it’s bad, but if it’s under Obmacare, its OK?

      And I am seeing this already. People with “Obamacare” policies really think I am obligated to see them…….I’m not contracted with every single insurance out there…….and they also think that “Obamacare” means healthcare is free from dollar one………something that does not exist anywhere on earth.

  • ninguem

    The OP link is to something other than this story, so who knows. For all I know, she’s making this up out of thin air. But, stipulate that it’s true.

    The seven grand mentioned is the alleged hospital bill, not the insurance deductible by OP’s description. Maybe mother has to pay that much, maybe not. Depends on insurance. Depends on when the baby was born.

    So…..deductible of $250, $500, $1,000, HSA maximum for HDHP is $12,500 for a family in 2014 by IRS regs. Where to draw the line? Some years, the person with the high-deductible plan has to pay that much, some good years maybe not.

    Every single physician with an independent practice, same with the independent ARNP’s, I guarantee they get people the beginning of every year who begrudge even the union insurance $250 deductible. What do you mean, I have to pay $100 out-of-pocket for this visit?

    Or………mandate zero-deductible insurance, insurance becomes unaffordable, and mother now has zero insurance.

    But hey, stipulate that this is so terrible, that the individual now has “skin in the game” (Obama’s words).

    What’s the answer?

    Obamacare, where many people will now find themselves with………high-deductible insurance.

  • ninguem

    “…..I heard this on the radio recently:….”

    Well, that inspires confidence in Jessie Gruman’s research.

    “…..Mom takes her new baby to the emergency department…….”

    She then links to a NPR article that does not mention any emergency visit for a neonatal urinary tract infection, but does link to a NPR article on price transparency in medical care.

    The article revolves around price transparency for medical services in the Denver, Colorado area……to use as representative of the country as a whole. Fair enough.

    The article was dated February 19, 2014, so two months ago.

    [comparing price-shopping for medical care, to price-shopping for a coffee maker]

    “…..But say you need something less fun than a coffee maker — like a colonoscopy. Shopping for one of those is a lot harder. Actual prices for the procedure are almost impossible to find, and Bob Kershner says there’s huge variation in cost from one clinic to the next……”

    [going on to talk about their research into price transparency in medical services]

    Google “cost of colonoscopy Denver Colorado”

    http://www.newchoicehealth.com/Directory/CityProcedure/Colorado/Denver/125/Colonoscopy
    http://www.cheapcolonoscopy.com/Cities/Denver_CO_colonoscopy.html
    http://www.ucdenver.edu/academics/colleges/medicalschool/centers/cancercenter/CommunityAndEducation/colorectal/Pages/CCSP.aspx
    http://www.thedenverchannel.com/lifestyle/health/free-cancer-screening-expands-in-colorado

    Allowing you to price shop, and even links to some free programs for those who qualify. The entire premise, proven wrong in a couple mouse clicks.

    I have no confidence in “experts” like this Jessie Gruman. When they say you can’t price-shop medicine, it usually means they haven’t bothered to look.

  • ninguem

    Indeed, price transparency is greatly needed. There has been a big push for this, because of the growth of consumer-directed health care (medical savings accounts) and especially with the Health Savings Accounts under the Bush Administration. This wasn’t invented with “Obamacare” it’s been going on for years.

    The problem I have with articles like this, is the authors are ignoring the fact that you already CAN price-shop medical services, the cost comparison sites have been up for years.

    When people say “it can’t be done” it means they haven’t bothered to look at all.

    • SherryH

      Oh, believe me, I’ve bothered to look. The problems lie with the provider/insurance situation. I ask the provider what it is going to cost, they say it depends on what the insurance company pays for, or what they change the allowable amount to. I call the insurance company, I ask them what the allowable amount will be (what they will pay for, if it’s applied toward the deductible etc.) they say it depends on the amount they are billed. Apparently, that amount is constantly in flux. Also, I have been told a number of times something would be paid for, and then had my claim denied. Sometimes it’s because of the code that was used. Other times, it’s because they charged too much or didn’t call ahead for approval. And on and on and on. In all my experience, I have never gotten a straight answer, not ever. No other industry operates in this manner, it’s completely illogical.

      • ninguem

        The more price transparency, the better. In fairness, usually these price websites are for well-defined discrete services. The NPR story claimed it’s “nearly impossible” to get a price for a colonoscopy, when that’s the sort of discrete service where you CAN get a price quote.

        It’s irritating to read “experts” make claims “you can’t get a price on a lumbar MRI”, when the author mentions his/her hometown, and I’ve been there and know there’s a freakin’ billboard on the expressway that reads “Lumbar MRI $895″ with the name of a local imaging center.

        That sort of thing.

        Then I know I’m dealing with, shall we say, a certain kind of “expert”.

        As another example, here’s something from the land of socialized medicine, the United Kingdom:

        http://www.nuffieldhealth.com/hospitals

        It’s a consortium of faciliities, you can look up by consultant, by location, by disease or procedure, pick what you want in the private sector, get your colonoscopy, and they stand behind the price they quote.

        In fact, if you have no insurance, and you can afford it but cash flow is a problem, they will finance it for you, like GMAC for a car.

        Why can’t we have this in “Free-Enterprise” USA?

        One thing that comes to mind. These British consultants may see National Health Service patients in NHS facilities at the NHS fee schedule and all that. But if that same patient, covered by NHS wants to get the medical or surgical treatment done faster (doesn’t want to wait in line), or perhaps wants certain amenities not available in the NHS, that same patient could pay that same doctor privately in a Nuffield facility.

        If I tried to do that in the USA, I’d be guilty of fraud by USA regulations. I’m 100% in or 100% out.

        In fact, I’ve had Medicaid recipients offer to pay me privately for certain medical services nearly impossible to get in the facilities that will accept Medicaid. A Medicaid recipient, with family support, and family perfectly understands poor Medicaid pay and why a private doc like me is not in Medicaid. They think it should be perfectly reasonable for them to pay me privately. THEY bring it up, not me.

        And I have to say no, and they’re puzzled.

        The law doesn’t let me.

        And I have pointed out, if we were in the UK, it would be OK. But we can’t do it in America.

        • SherryH

          I agree with you completely. What bothers me about this article is that it uses an emergency situation to give reason why transparency doesn’t matter, and that only furthers the cause of those who profit from keeping prices hidden. Sorry, but other westernized countries have transparency, emergency or not. What you do or don’t do with the info is up to you.

  • Trisha Torrey

    Previous commenters are missing Jesse’s very important point; that is – that patients accessing healthcare cannot and should not be considered “consumers” – because they cannot, and often should not BEHAVE as consumers. Being a consumer assumes that we have all the information we need to make a purchase; therefore we make it, or we don’t. In this case, the mother didn’t have the information she needed; she didn’t know the diagnosis. Therefore, no matter how much transparency there might have been – she was not a consumer and should not be expected to act like one.

    There are some times that patients can be real consumers, but the assumptions about that usually miss the mark. I’m a consumer when I buy over-the-counter aspiring to take when I deem my headache has gotten bad enough. But when I go to my doctor for odd symptoms, having no idea what tests will need to be run, or what the ultimate diagnosis and treatment will be, then I can’t be a consumer.

    Please don’t miss Jesse’s point. This isn’t about UTIs, it’s not about deductibles, and it’s not about the ER. It’s about expecting patients to behave in certain ways because it’s convenient to call them consumers without delving into the reality of their situations.

    • ninguem

      Oh, I get her point all right.

      I get that her point is trivial and inane.

      Unless you’re trying to tell me that an average person can’t tell the difference between a neonatal infection where a baby could die in minutes, versus the decision to get brand-name or generic birth control pills.

      And they say doctors are paternalistic.

  • Dr. Cap

    It’s also about what all of us MDs know to be true–that the existence/non existence/degree of transparency we have is not the holy grail to drop health care costs.

    • SherryH

      No, it is not the answer to dropping costs, but it will help people in certain situations make sounder decisions. I say this from first hand experience. I made different choices than I would have if I had known the true cost outcome. In other words I got screwed. Transparency would have saved me thousands.

  • ninguem

    Be specific.

    • Martha55

      The thesis of the piece is patients are often not in a position to make a sound medical decision based on money.

      Your complaint is that the patient isn’t real because there is no way this situation could occur.

      • ninguem

        Oh, that situation could occur.

        So what?

        OK, sometimes the patients are NOT in a position to make decisions based on money. So listen to the docs.

        Sometimes they ARE in a position to make decisions based on money. Then get the treatment that’s just as good, that’s on sale.

        Your point would be…….?

  • http://www.alyson.tsfl.com Alyson Del Vecchio

    I agree that there should be price transparency but the information is only marginally useful. My health insurance provider has price and quality comparisons on some common procedures (never any that I have looked for though!). The problem lies not in the price lists but not taking into account how a patient arrives at the point where they know that they need a procedure. If a patient has a problem they visit their physician for a diagnosis or referral to a specialist. After going to the specialist they find out they need a procedure. At this point the patient has already invested time and developed some sort of a relationship and plan with the healthcare provider. This provider works out of a specific hospital or 2. Now at this point my insurance wants me to look up the procedure and find out which hospital/doctor has the best price? Too late! Why in the world at this point in my illness would I start over with another healthcare provider?

    • Lisa

      When I was looking for an orthopedic surgeon, I found out which surgeons were preferred providers under my insurance plan. I am charged a lower co-pay, without deductible for in network providers. When I was looking for an opthamologist, I followed the same procedure. I took the list of providers with me to my PCP when we were discussing my need for a referral. I told him who I wanted to see based on my research; he agreed with my selection and provided the referral. It wasn’t a big deal.

      When I was diagnosed with cancer, I made sure the surgeon and oncologist I was referred to were preferred providers under my insrance plan before my first appointment with them. Again, it wasn’t a big deal.

  • R.E.B.

    A fever is a neonate is an emergency until proven otherwise. Going to the emergency room was the right thing to do, and admitting the baby to the hospital for 48 hours is also supported by guidelines. If the mother had called the nursing line at her pediatrician and told them that her baby had a fever, she surely would have been instructed to go to the emergency room for urine and blood cultures and admission.

  • Lisa

    I was responding to a comment about non emergecy situations. Clearly, in an emergency situation things are different and the problems you mention exist.